Acid sphingomyelinase is a water-soluble, lysosomal glycoprotein that catalyzes the degradation of membrane-bound sphingomyelin into phosphorylcholine and ceramide. Sphingomyelin itself is an important component of the extracellular leaflet of various cellular membranes. The aim of the present investigation was to study sphingomyelin hydrolysis as a membrane-bound process. We analyzed the degradation of sphingomyelin by recombinant, highly purified acid sphingomyelinase in a detergent-free, liposomal assay system. In order to mimic the in vivo intralysosomal conditions as closely as possible a number of negatively charged, lysosomally occuring lipids including bis(monoacylglycero)phosphate and phosphatidylinositol were incorporated into substrate-carrying liposomes. Dolichol and its phosphate ester dolicholphosphate were also included in this study. Bis(monoacylglycero)phosphate and phosphatidylinositol were both effective stimulators of sphingomyelin hydrolysis. Dolichol and dolicholphosphate also significantly increased sphingomyelin hydrolysis. The influence of membrane curvature was investigated by incorporating the substrate into small (SUVs) and large unilamellar vesicles (LUVs) with varying mean diameter. Degradation rates were substantially higher in SUVs than in LUVs. Surface plasmon resonance experiments demonstrated that acid sphingomyelinase binds strongly to lipid bilayers. This interaction is significantly enhanced by anionic lipids such as bis(monoacylglycero)phosphate. Under detergent-free conditions only the sphingolipid activator protein SAP-C had a pronounced influence on sphingomyelin degradation in both neutral and negatively charged liposomes, catalyzed by highly purified acid sphingomyelinase, while SAP-A, -B and -D had no noticeable effect on sphingomyelin degradation.